SD Leaders Agree Finances Must Be Fixed, But Don’t Agree On How

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Aired 11/12/10

It’s no secret that San Diego has money problems. It has for years. Now city leaders are showing more drive to fix those problems once and for all. But even though there’s consensus on what needs to be done, there’s little agreement on how to do it.

SAN DIEGO  It’s no secret that San Diego has money problems. It has for years. Now city leaders are showing more drive to fix those problems once and for all. But even though there’s consensus on what needs to be done, there’s little agreement on how to do it.

First, let’s be clear about what we’re dealing with. San Diego has a structural budget deficit, meaning it continually spends more money than it takes in. There’s also a projected deficit of $72 million for the coming fiscal year. At least that’s the number Chief Operating Officer Jay Goldstone is working with. Though he recently told the city’s budget committee he can’t be sure that number won’t change.

“We are tracking major revenues which obviously drive a lot of the deficit and we are seeing a lot of positive signs. So I’m cautiously optimistic it’s not going to grow,” Goldstone said.

But Goldstone told the group the deficit likely won’t shrink either. This was the first time the city’s formally met to discuss the budget since Proposition D was defeated in November’s election. It would have increased the city’s sales tax rate by a half-cent for five years, generating more than $100 million a year in revenue.

It would have solved the city’s budget deficit -- for the next few years anyway. Except that voters didn’t want to pay more. And that was a message heard loud and clear by tax supporters like Councilwoman Donna Frye. Frye isn’t on the budget committee but showed up to talk anyway. Frye believes it’s time to outline what’s not being considered to fix the structural budget deficit.

“I think at this point we can probably say that taxes are off the table. I think that you believe that bankruptcy is off the table. For me, I think that you probably would want to take off the elimination of retiree health care,” she said. “And I think that we can also say that certain vested benefits aren’t going away, so let’s take those off the table.”

Frye said by discarding those options, the city can focus on what it does want to do. But there are those who think some of those options should still be considered, specifically former city attorney Mike Aguirre, who’s still touting bankruptcy. Aguirre believes San Diego is insolvent. And he said that some pension benefits were granted to city employees illegally, meaning they are not vested and can be stripped if the city files for bankruptcy.

“We have the ability to not have to contract out, save our defined benefits pension system, not have to sell city property, not have to go through torturous months of the kind of conflicts that we’ve seen,” Aguirre said. “All we have to do is rid ourselves of that portion of the benefits that were illegally granted and we’re home free, it’s a fresh start.”

Aguirre’s plan was met with contempt by current City Attorney Jan Goldsmith, who called the idea nonsense.

“I know people are attracted to magic potions. They’re attracted to the easy fix. In this city the pension problem was first denied, that was the easy way. Then it was avoided, that was the easy way. Then there was prayer for miraculous investment returns,” said Goldsmith. “None of that worked. This is just in that same mode.”

But Aguirre isn’t the only person who’s brought up the bankruptcy possibility. Vincent Mudd is the chair of the Citizens Fiscal Sustainability Task Force. Early last year that group said bankruptcy was something the city should consider if other financial reforms didn’t work. The report was pushed aside by most city leaders. But now Mayor Jerry Sanders has asked the task force for help vetting various budget plans. Mudd said all options need to be considered, though not all will rise to the top.

“If I said to you today, cut employee wages by 20 percent and I could eliminate the structural budget deficit. That’s an idea, but that is not a plan. That’s not a plan that’s gone through any vetting yet,” said Mudd.

Mudd’s group is currently studying a financial plan from Councilmember Carl DeMaio. It draws on many of the reforms included in Proposition D. And those reforms are getting some traction with city leaders. Just because the measure failed doesn’t mean they can’t be carried out. And with the next election just two years away, there are plenty of people at City Hall jockeying to be the one to deliver a solution to the people of San Diego.